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Already Bought A 3D LCD In Anticipation Of QE "Instarefi" 1.999? You May Want To Consider A Refund
Earlier today we noted that the biggest buzz on Wall Street is the recent suggestion by MS and ML's Harley Bassman that the GSEs should provide some form of autorefi program to take borrowers to market rates. As this would impact a vast majority of the 37 million of mortgages outstanding backed by the government, not only would this housing stimulus have a huge impact on consumption appetites, but it would be a political coup as all of a sudden the administration would find tens of millions of giddy homeowners who are paying far less monthly, and quite satisfied with the way Obama has handled things. It is thus likely that this program will take off shortly (if at all) just before the mid-term elections to neutralize all the pent up discontent focused on the administration. Yet there may be less than meets the eye. As Market News points out, over the past 24 hours Wall Street has gone into overdrive analzying the consequences, both positive and negative, of such a move. Below are the conclusions.
First, here is how the pricing action in various MBS tranches occurred:
Premium MBS bonds went down in price because this refi concept stoked speculation that primary mortgages with higher rates will get paid off soon and the higher coupon MBS that backed those mortgages would be called back. This paper would be replaced with lower coupon MBS that would then be backing primary mortgages at lower rates.
And here is the prevailing Wall Street sentiment on what seems quite certain to become the Treasury's latest stimulus:
Many mortgage analysts said the concept sounded good but there would be many hurdles to cross before this could get done.
Still, mortgage strategists at Credit Suisse said the idea is "appealing in principal" but there are many barriers. Some of these are:
1) Program would have to be structured as a refinance not a modification because the former costs investors and the latter costs Fannie, Freddie and Ginnie;
2) Eligibility decisions would have to be simple to execute "en masse" and in some cases government might be "over-subsidizing;"
3) In order to use the current system, the housing agencies would have to "indemnify" lenders against put backs;
4) Refi costs would have to be rolled to get around borrower cash constraints;
5) Might have to be origination fees and loan level pricing adjustments (LLPAs) would have to be dropped, reduced or rolled in;
6) Agencies might end up charging higher guarantee fees to compensate for higher Loan-to-Value or LTV;
7) Assuming all borrowers with 6% or higher mortgage and current LTV>80% from '05-08 are refied might create $750 billion in lower coupons and Fed's balance sheet might have to called upon again, with likely opposition in Washington;
8) MBS market would be disrupted again as tradeable float taken from market;
9) It could take 6-9 months to process the loans. They estimate $10-15 billion in incremental annual savings for homeowners, much less than other estimates in Street.
Citigroup mortgage strategists said the chance of this program coming to fruition was "remote" and highlighted the costs.
Citi says a program that would refinance all GSE loans with a 5.75% or higher coupon into a 4.50% coupon could provide about $30 billion in stimulus from consumers.
But It would also cause a $30 billion premium loss to the GSEs retained portfolio, raise Treasury borrowing costs by $5-10 billion ayear as yields rose, and mortgage rates might rise by 100 bps.
Citi says the rise in mortgage rates would be due to higher Treasury yields, higher negative convexity, higher implied volatility and massive gross issuance which would be a significant short-term problem.
The "free lunch" refi programs that some are advocating "are actually very expensive and would result in more indigestion than thegovernment can stand," the Citi said in a research report.
They also reminded that 90% of the loans that would be allowed to refinance are not delinquent loans. Delinquent loans are getting betterand more appropriate help from other government programs.
Mortgage strategists at Nomura Securities said the odds of such a plan are only 10% if there is no double dip in the economy. If there isa double dip, the odds rise to about 30%.
If the plan was adopted, most mortgage investors would suffer "meaningful" losses in the short-term.
However, the $1.3 trillion in mortgage securities owned by Treasury and the Federal Reserve would suffer less because their costs are lower, they are not marked to market and any losses would be offset by the interest the government has already received, Nomura said.
But Nomura also pointed out that if such a plan was instituted because of a double dip in the economy, the effect on bond yields and mortgage spreads would likely be reduced.And the government might convince originators to reduce primary/secondary spreads to more normal levels.
Because of these factors, Nomura thinks primary mortgage rates would only rise to 5.00-5.25% which is still attractive.
Finally, Nomura says mortgage investors might complain about government interference in private affairs, but the government could make a few good arguments of its own.
For example, where would the markets be now if the Treasury and Fed had not bought $1.3 trillion MBS foster lower mortgage rates.
And the government would indeed be helping people who are not delinquent and are still making their mortgage payments at much higher than current market rates.
That might sound like a pretty admirable plan if a double dip ensues.
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balls
Dammit! I was just making up my Christmas wish list to my Senator and Rep. -- my vote is up for grabs to anyone who can provide monthly 60 gallons of free gas and free electricity.
To summarize the above, the criminal banksters, wishing to extend the ponzi, want to ensure that the sheeple will continue to pay interest on their loans. So they need another gimmick to convince the useless eaters to keep paying interest . The banksters, unlike the typical great unwashed, understand that the loan principal will never be paid back in nearly all cases. The banksters, however, do not care since they lent them FRN´s backed by nothing other than military force and threats. No tangible value was given to the original borrowers, courtesy of the printing press, so nothing was really lost. Rather, the trick is to keep the suckers paying interest, knowing full well that over the term of most mortgages and loans, far more money will be collected in interest than was ever ficticiously lent out.
bingo
dollar backed by MBS and leveraged real estate
government gains interest in residential real estate mortgages backed by a dollar that will implode = government gets hard assets when dollar implodes by calling in all mortgages.
Very good, young grasshopper!
While cumulative interest payments do indeed exceed the phantom value of the original loan, interest itself is nothing but an illusion fueled by the same confetti.
The real prize in this millennia old tale is land: productive capital (facilities) and raw materials (commodities). This is how it works:
Phantom capital is "lent" for very real productive assets. At some point, which can easily be modeled (exponential function), debt loads (interest payments) exceed income serviceability and repossession takes place.
However, there is a rather pleasant ending in most instances. You see, even though the power-elite end up holding all the productive assets through their fraud, eventually they must flee for their lives as the mob chases them off the island, region and/or continent.
Oh where, oh where will they go next?
- you're right B9K9, its the same all over, the powers that be doing a smash and grab on everything that's worth anything in a bid to separate the ordinary people from their land and resources.
Very interesting video ... about to happen in NorCal at about 3:25;
http://www.youtube.com/watch?v=HrByW1PIqYE
Good tube vid Rusty . If as is the case the Gov't is 95% of the mortgage market , ultimately they own most homes ( Like a Snidely Whiplash ) they can pass foreclosure dictums ( um...er..laws ) and take away homes based on religious , political views at whim . Just like they are confiscating public mineral and resource lands en masse . Isn't it all just amazing . We have become a socialistic nation and not even seen it happening . Slaves to Gov't ( um er Corporate America) . The plan is NO PROPERTY AND TANGIBLE ASSET ownership by the people . Slaves all.
The moon.
To the Bailout Team at the Treasury
http://market-ticker.org/
"With mortgages there are a lot of games played because unlike a regular bond that has defined call provisions (if any) a mortgage can prepay at any time, removing it from the pool. This creates a duration problem for the seller which is accounted for in various ways."
"But what if some of the notes aren't paying?
Well, at first blush, you're dead, because the coupon "inbox" from the mortgagees is short. But in fact some of them have prepaid - which means that if you're not being honest you could raid the capital "box" and make the interest payments with it. "
Could it be that bad over there at Freddie/Fannie, I mean they wouldn't be hiding any other skeletons would they? Nah, they would never do that....
That about sums it up folks.
REFIs for everyone!!1
Of course none of this is necessary in this, the summer of recovery.
I'd be quite put out if I were an MBS investor. But the Supreme Court has allowed government to abrogate contracts (c.f., Chrysler), so I guess there is nothing anyone can do about. Rule of law be damned.
The rule of law is only for us. Justice = just us
indeed rule of law be damned. too big to fail. aig vs. bear stearns vs. lehman brothers. non treasury securities all over the fed balance sheet, far beyond any value ever backed by congress. war without declaration or attack. warrantless wire tapping. imprisonment/torture/rendition/assassination of american citizens by executive order.
the nation is on a very slippery slope that began to dip a long way back but has reached well beyond double black diamond at present.
Doesn't matter if you drop the interest rate to 0%.
If you can't afford the home, you can't afford the loan.
Why do you hate America?
That's funny.
for our freedoms and our fries.
Will they be picking winners like deadbeats and illegal aliens or is this for anyone ?
This is America. Take one guess.
Thank you for the one smile I've had all day...
The NSA will use their super computers to compare voter registration rolls to mortgage records to determine which borrowers are elligible.
Crap I'm out!
Nah, they will get the SS#'s of Dead people in Chicago, and house illegals there.
Just imagine how many illegals you could get into 3500-5000sq ft!!!!
Maybe they will use BMI that is to be electronically reported by your doctor to see if you are fit enough for instarefi.
One would have to analyze if getting the refi outweighs the not paying at all. No doubt a one page refi form would negate any legal rights they may have on the current ill termed loans. By rolling over, they would loose the right to sue. For people underwater, what is the difference in interest rate? The principal is still greater than the asset value. I would be careful on any refi offers if I was behind or underwater.
I'm curious, who would they lose the right to sue, and under what pretense?
And if the refi's came with a new clause saying that the refi is "Full Recourse" ? that of course would be noted in UFP (ultra fine print). Oh how lovely it is to write a new contract. You could stitch the debt slaves pretty good.
"You could stitch the debt slaves pretty good."
Amen! This is precisely my concern! I owe less than 70k, and am several months ahead in payments on my 5.87% fixed rate mortgage. A rate of 4.5% is tempting, but I don't trust this bunch of crooks one bit. Its the little guy that always gets in the end (pun intended). There has to be a catch....
<<Full Recourse>>
Bingo! There has to be a catch...the Chinese want their money back!
I guess you do everyone since the bankos would have gone banko anyway.
We are quickly spiraling into the comical. This plan would further the tearing of the social fabric and bring further pain as the system unwinds under its own weight.
The Fed is owned by the banks. Therefore, there will not be a plan floated that doesn't benefit them. Further quantitative easing and/or refinancing will simply allow them to dump their bonds at higher prices before their eventual collapse. I also think the refinancing will allow them to attach some recourse (v. non-recourse) to the loans, and also perhaps also clear up all of the mortgage documentation/ownership issues...
Bingo....getting them all on recourse loans means you're a debt slave for life. (Insert FEMA camp relocation drivvel upon your eviction from your home). I'm with shitty WFC now, I'm afraid of refi'ing anyway because I don't want my mortgage to get shipped off to "Freddy fucking Mac" (I miss Walstreetpro2) or Fannie.
I think his majesty Obama will save this one to rollout in mid-2012.
You mean there won't be any impeachment...?
Need 2/3 in the Senate for removal. Don't see many DINO's there.
Yea good point! Why no more videos from wallstreetpro2 lately?
IMO, he got a visit from the MIB.
They either paid him off (big $$ to shut up), put him in jail (in Egypt) or killed him (but someone logs into his Youtube channel once and a while). His real name is Kevin Rowland and he is from North Carolina. Anyone out there have good internet tracking skills? Let's find out what happened to him.
Haha! Freddie Fucking Mac!!
Wouldn't that be just Wonder-Goddam-Fuckingful?!
Wait a minute I had to stop after getting to this point:
" In order to use the current system, the housing agencies would have to "indemnify" lenders against put backs;
Doesn't this transfer the entire fucking underwater, non performing mortgage market to the tax payer in one simple swoosh?
Doesn't this transfer the entire fucking underwater, non performing mortgage market to the tax payer in one simple form?
Yes!! That's the whole point, don't you get it!! The one problem is, HAMP was trying to do pretty much the same and it's a huge failure.
That is exactly why the likes of MS (i.e. Saxon) are pushing this idea.
Thing is..this wouldn't solve shit. I'm guessing, but I would think that most defaults that currently happening are people walking away due to their loan to value. This does nothing for that. It does however accomplish step one for the fed and that's getting the banking system off the hook. Then they just bleed them off for the next 10 years. There may never be another Morgage originated in the US again if this happens. I'll have to go from building homes to government bunk houses.
Kicks the can of sovereign bankruptcy, and Mad Max. So that is something, yes?
+1000...You got it
The mortgages are already owned by FNM/FRE/FHA, thus the taxpayers are already on the hook for the underwater non-performing loans.
Bingo! This would reduce the chance of more people doing strategic defaults.
MS' plan is a silly idea. See this:
http://www.calculatedriskblog.com/2010/07/slam-dunk-stimulus-ms-missing-...
In other words, f*ck the savers, reward and encourage debt till all are completely enslaved.
OH shit....you figured that out?
I feel so silly being a saver.
SS, it is too late. I feel the shackles on my ankles!
SS, it is too late. I feel the shackles on my ankles!
Would this not greatly reduce the TBTF's revenue generation? Granted, the defaults are also a hammer blow but dropping hundreds of BPS wouldn't be good either...right?
Why not apply this to credit card rates and, better yet, student loans?
Anyway, what great political theatre this would be.
This would be a huge boon for the TBTF's, as it would let them off the hook for buybacks.
Punks giving away my tax dollars.
Hate'em
Attention Mortgage Investors : You are about to be run over by a Chrysler !
I drive a 300C...I'm open M-F after 5pm and can swing an occassional Sunday while my wife is bible thumping.
I'd be happy to help out.
....thanks. Be sure to hitch up a trailer to that 300 so we can pack out all the dead pension fund and insurance company carcasses with us. Bring tie-downs.
This is about as unfair a plan as I can imagine therefore it stands an excellent chance of becoming law imo.
I was hoping nobody would drop F-bombs here. "Fair"...when was the last time you saw a plan involving the banks that was fair?
Everyone is the same, even the fatties and uglies get to be cheerleaders at Owebama school. Those who privately finance are stuck with higher rates while the gubmint backed deadbeats get break after break. Like I said, it sounds about right.
Happy ZH birthday, Buzzy! Just noticed
Though this isn,t a bad thing for those that gain,surely plans of a far larger magnitude are required to stimulate mass consumption once again and in order to do this you need to get people to spend the cash not save it surely ........ the rub is that until people feel secure in employment they will continue to save.
This is all about the buybacks - refi the 2005-2008 vintage mortgages, get the banks off the hook for repurchase requests.
I would love to hear what Mike Farrell at Annaly Capital has to say about this.
I can guess:
$(#*$)%*$#&&@()$)%*##)$%*#)$)%*(_@(#$
something along those lines.
1- mtg rates would back up maybe 25-40 bp - at most
2- Annaly would go under
3- Over half the fed portfolio would prepay - the would have the ability to reinvest paydowns if they so choose.
4- large amounts of the GSE portfolio would go away
5- Vanguard GNMA fund would get crushed
6- Pimco would be happy
How about a rollback to 4 1/2% credit card interest rates?
ROTFL.
The whole program is consistent with the view that our government is completely criminal, corrupt, and illegitimate.
Rumour GOOG is banned in China again, BIDU up like a MF... But news doesn't seem confirmed.
US = Japan.
100 year 1% mortgages for all. But it wont be remotely enough to kick start any investment in American business or foster a real recovery in real estate.
Its game over. Walk away or sell now whilst you can and rent : get yourself out of the debt system whilst you can , do not get sucked further in. If you can afford to pay off your mortgage , do so , those that see the miracle of "inflating away our debts" are also drinking the govn sponsored kool aid.
Leverage should have wiped out the losers in 2008. It is still out there waiting to murder. Anyone attempting to leverage up now is going to get hosed with no chance or recovery. Wealth preservation. Not wealth accumulation. If you aint rich now , youre very unlikely ever going to be , the draw bridge has been pulled up.
I bet any plan from the Beltway, Benefits the Bankers, Screws the Savers and Throws the Country Further Down the Rat Hole(TTCFDTRH).
When the Chinese come to Collect on their Debts, the food, the natural resources and the Good looking Girls will be long gone to China.
We have turned into a society of Whores, Hustlers and Pimps. Bring on more Bread and Circuses, let the games continue. Sometimes, I just wish I could puke to stop the feelings of dispair, our children and grandchildren are Soooo screwed.
Agreed, my disgust is past expressing. The poor bastards who lived in the last days of the Roman empire must have felt this way - a whole-body craving to vomit up and slough off the fecal mountain of injustice and deceit.
I don't think that this can work -- unless the callable funding to F&F gives a low enough funding rate for them, this will just result in more losses on the retained portfolio, and on the securitized portfolio, this will only result in lawsuits from bondholders.
The Fed and Government (through Fannie, Freddi, Ginni) own most of those papers. Are they going to sue themselves? If it's implemented, it would essentially be a disguised drop of free money from the "helicopter" to buy votes.
I'm so glad I dropped out of college and enrolled in Zerohedge 101.
And if you accept the Refi, will you then owe the US Treasury much like a student loan? ie, something which cannot be discharged in bankruptcy? That would be quite perilous indeed...
+5
....damn fine inquiry, AR. Smart fish always expect a hook buried somewhere in the bait. That's how they live longer and get smarter.
BK's had its balls cut off after that last exodus post dotbomb... most people can't get out of ruin as it stands now
LOL, Rainman.
I had a similar mental image while reading about this. My image was of a starving mass of people all staring at a juicy lump of meat with a buried hook in it, hanging in front of them.
What strings are attached? Default = Free ride to the nearest FEMA camp.
Is it too late to write a check against my HELOC, walk to the store, buy gold and catch the next flight to Panama?
I'd like my income, portfolio balances and net worth rolled back to early 2007 as long as we're at it. Seems about as "fair" as anything else I've read lately.
How much monie is set aside by Treasurie for the re-financings?
Higher rates, how?
And the interest has earned that much? So how much more juice do they have in the pickle?
Sounds like Walled St and DC are scramblin' on a rollout. Who's passing and who's catching I don't want to know!
will they over ride state laws on non-recourse?
NO, it's just money. I can't agree that our children and grandchildren as screwed.
Screwed would be to suffer the slow destruction of your culture as we did over the last 40 years. Screwed would be to watch all the icons of our society, the church, politicians, education system, and even our sports heroes and movie stars, become liars, pedophiles, petty whores, and crooks, or in the case of a certain gentleman from the House Financial Services Committee, all four.
History doesn't move in a linear direction, it moves in cycles. What you see coming depends upon things incrementally proceeding down the crimson throat of Hell. Never gonna happen! The global system is wound tight, and somethings going to break real soon.
We were screwed. We were screwed by the most failed generation of human beings since the last of the Roman citizens. They were the Baby Boomers, the most narcissistic, ignorant, self destructive generation in American history.
Very soon, gone will be the days when some dirty bum will glare into your face because he's been told, despite the fact that he has never accomplished a damn thing, that he is as good as you are just because he is human. Gone will be the days when some crass trash talking vermin can blame all his misfortune on racism and the system. The hand outs are coming to an end. The bad old times are coming back, and so the return to some sort of culture where justice and a sense of shame have some real meaning are gong to return. I don't mourn the loss of what this society has become. It's been a slow death, like being eaten by insects. The next installment of American culture will be a lot more cultured, because nothing cuts through the bullshit quicker than hunger, pain, and regret.
No, don't feel bad for our kids, feel bad for yourself because you spent your life being slowly enslaved. Our kids won't have as many baubles as we, but they, or their kids, will be released from the yoke of tyranny BECAUSE this situation is so messed up beyond imagination that it cannot continue. The enemy was released when we moved from a republic to a democracy. The enemy was the tyranny of the democracy, and that democracy is about to end.
Sorry to be so frank. It sounds like I don't love my country, but I do. It's not patriotic to watch it being slowly strangled or to revel in the destruction of what is killing it.
Stop being depressed. We can't predict the future, and if we could, we wouldn't be posting here, we'd be spending our billions on petty whores and crooked politicians. Things being messed up CAUSES improvements to the situation. Everything is hunky dory.
Amen.
dude (or dude-ette), wow...left me speechless (which happens more and more these days as I learn)...so much truth in your post, so little patience in me to "just get it on, already".
Ever read Hemingway's Nick Adams stories? Been this way for a LONG time.
Gen-X ready to clean up the Boomer mess, and teaching my kids the "old" way of life...honor, work, thrift.
Thanks!
edit: actually, I have been cleaning up their IT messes for 15 years now, so I am tired...can we get to the point of needing buckets, mops and brooms for a wee bit? "Physical" work does wonders for the soul...lol
"nothing cuts through the bullshit quicker than hunger, pain, and regret."
+10000000000000000
Can I put this on a T-Shirt?
It's a plan to offload the TBTF of their moribund portfolios. That's the main goal and it's being spun and sold to the sheeple as a "gift" from Uncle Sugar. The trouble in Euroland this spring/summer exposed a major vulnerability in the US TBTFs: whereas in 2008 we were concerned about Euro Bank exposure to the US markets, we are now concerned about US Bank exposures to Euro Banks. The incestuous web of pyramiding loans was brought to light and it is now clear that a second leg of the financial institutional collapse is imminent.
The goal of the "Refi Plan" is therefore to head off the coming crisis at the pass: US taxpayer sponsored duck and cover operation before Euro Land does the same.
Excuse me, and I do know that most folks have a mortgage still and are even paying what they agreed to pay . . . but can someone explain to me the benefit to those who signed on the line which is dotted and PAID THE FUCKER OFF?
What do you get if you paid off your mortgage, which by the way, IS WHAT YOU'RE SUPPOSED TO DO?
How about a 4 x 4 cell? If you pay off your debts you hate America. If you actually stoop so low as to save, you're a goddamn terrorist. If you send bin Laden a picture of your money stuffed in your mattress you get an honorary Al-Qaeda membership card. 72 virgins beats the hell out of a toaster.
It is beyond outrage. You sign on the dotted line. You pay the fucker off as promised, at the rate you agreed to pay until you lump summed in the remainder of principal. You own the house and land. And the government dismisses your existence and rewards the deadbeat scum.
Crash is Optimistic - you never, never , never ever own a damn thing. You owe the bank zero but you keep paying the county and the state. No pay their bills and they take the house from under you.
Better to lease a small Island in the south pacific for six bags of rice and a small sow / year.
Well, almost. You pay taxes and insurance, which will always be less than equivalent rent.
But one gets to that point by paying the rate agreed to. I will look forward to the gov't refunding to me the total difference in interest I paid at that rate vs this new rate they are going to apply. That will be a nice lump sum check. I'll buy lots of ipads and TVs.
You get exactly what everyone will get for having paid into Social Security their whole lives. Nothing, and a feeling of having toiled your life away for nothing while everyone else gamed the system.
I was misinformed...
All pundits and prognostications aside - one VERY clear fact emerges.
It will end up costing the average taxpayer more hard earned dollars, which will be transferred to the TBTF's.
Bullard and friends are clueless, sorry. First of all, this is the guy who was a rabid hawk only 10 minutes ago. Now that he's had a rebirth/baptism event, he's a born-again rabid deflationista. Well, let me explain why even this new jingoism is dooming the economy through wrong-headed rigging. First off the main goal here is to protect the TBTF banks as I mentioned, to offload non-recourse loans in danger of defaulting and deflating. Secondly, discounting coupons just reinforces the Japan-style deflationary spiral. It introduces another deflationary factor into the residential real estate calculus: future costs are now being officially pointed in a downward vector. Finally, it's a form of what the government is planning on a much larger scale: soft defaults. This plan sanctions a soft default which will be passed on to the securitized holders, sending a chill through credit markets. It's haircutting without a bankruptcy.
I don't believe that the homeowners are going to spend their cost savings liberally. That would have happened in yesterday's economy. The psychology has already changed. A penny saved is now truly a penny and a half earned in a deflationary environment. The Fed's plan will just serve to reinforce this notion. The perception of homes is morphing from cash cows and speculative investments to ball-and-chain white elephants and money sink-holes. Think about it. If employment and incomes deflate due to continued outsourcing, overcapacity, aggressive corporate cost-cutting and de-regulation then who is going to buy a vintage 2000-2010 home? There's one lost decade already.
+10...." A penny saved is now truly a penny and a half earned in a deflationary environment." yup, that's me...tho I am screwed cuz I won't/don't have a GSE mortgage, so i won't have the opportunity to test your theory...oh well...
From 2000 to 2005 about $75 billion of 5 year Treasuries were issued at an average 3.25% rates. In August 2010 over $80 billion of 5 years were issued at a rate less that 2%. Amazing to watch the magic on a daily basis. In a few years, Treasury will be issuing $80 billion per week. There will be few opportunities for small business and even State/local/City Govt will contract. We are heading toward central planning with nearly all power in Washington. Large Cap Equities may not be hurt since they will be part of central govt distribution system. The military industrial complex hasn't been touched. Total borrowing/debt is stable with contraction on the individual/State level offset by increases at the Federal level. This will continue and accelerate. There is no deflation on K Street, only on Main Street
There is no deflation on K Street, only on Main Street
....another aspect of my theory of simultaneous deflation and inflation co-existing in a destructive way within this engineered economy.
My guess was deflation in high-wage countries & inflation in low-wage countries... like osmosis creating balance.
And countries with salaries somewhere in between will either end up winners or suffer stagflation...
on Thu, 07/29/2010 - 16:53
#495083
Bingo....getting them all on recourse loans means you're a debt slave for life.
great post....above....this was what I thought
Food for discussion: QE 1.9999 will mark the official death of the Bush-era McMansion. By acknowledging and sanctioning deflation, the Fed will be providing the signal that the McMansion has passed from an asset to a liability and hence into history.
McMansion is already history, but Bob Toll has not gotten the memo. He will get it in time, as he believes that the reflation strategy will work.
Sell your Toll stock, as a fool is in charge.
take Fanny and Fred and FHA....and ALL.
nationalise them all...
turn them all over to the SS trust fund....
go through all loans and claw it all back ...if there is fraud..
burn the IOU's in the file cabinet....2.5 tril
done....SS is paid for ...never to be raided
the trust fund of the USA of the people..
This is easy to figure out. You cannot get blood from a stone without incentive. So the goal is to extract what little remaining cash from Americans remains which takes temporary pressure off default, gives banks additional time to reorder, maybe it falsely buoys home prices since unprecedented action has not had the desired result.
In the mean time they drop the 1000 payment that they were beginning to see zero on and the pandemic of stratetgic defaults into 500 " rent equivalent payments" to serve the greater good.
Remember something is better than nothing.
Are these refis fixed rates? If they are not and they float with interest rates in the market then expect rates to surge as banks do not play that game. Enhanced kick the can in my opinion with increasing desperation.
Better to keep the payments coming in..free up consumer spending..then have default followed by bank losses and decay of previosly healthy loans as former above water from decades ago become underwater.
It is better for them than allowing the horrific ability for buyers to purchase homes 60% lower than current levels.
Low interest on high false prices greater than moderate interest at rock bottom prices.
That's optimistic, in my view. Rather than kick the can, this action will actually mark the beginning of "state sponsored deflation" aka soft default. It's a cram down but the banks will go for it because they get to offload their moribund portfolios and at no cost. Banks won't have to pay for foreclosures, repossessions and won't need to carry big real estate inventory with associated costs. It's a freebie to them. At our expense, of course. It's a haircut to the securitized mortgage holders aka soft default. But most significantly it is a full acknowledgment and capitulation to deflation economics, a major shift for the Fed. And that will only serve to feed the downward spiral as the whole game strategy changes. The "savings" homeowners get from lower interest payments won't be spent as deflation psychology gets further entrenched and the Fed is indicating that they believe that the future value of their homes will deflate further. Meanwhile the cost structure of homeownership will rise as taxes, insurance, local essential services, energy, security and even building materials increase thanks to Fed "reflation policy", which Bullard said he wants to pursue aggressively. People didn't spend the tax rebates in 2008. And that was then, this is now.
I don't know though. Did Ben have someone start this freakish talk to try to get interest rates to actually rise in an attempt to "JUMP" start the economy?
Yay! This will lock the housing market in stone. Nothing will sell. No one will be able to sell or buy. Gov't idiots! To even contemplate this indicates just how bad things really are.
Yes, it is an admission that they have failed.
They are desperate and will do anything.
Got Sig?
This is tough. Let me see, do I want a refi' or do I want a job ? Hmmm, I have to think about this a little longer.
Michael Pento
Posted Jul 29, 2010
Note: Michael Pento has just joined Euro Pacific Capital as the Senior Economist and Vice President of Managed Products.
http://www.321gold.com/editorials/pento/pento072910.html
I see my friend Peter is to exit Euro Pacific Capital
can you get them not to call me to get my cash into the fund....but I love the calls.....after I give them the hell...
I say ,,,,hello....are you still there?.......answer.....we can not help you at this time.....LOL
This "plan" makes no sense. First of all, while a lot of mortgages out there are GSE held, quite a few are not. It has only been since 2008 that the government has been the lender of only recourse (to the tune of about 90% of the loans in 1Q 2010.) But before September, 2008, they were a relatively low percentage, and so, quite a few mortgagors would derive no benefit from this plan whatsoever.
This is some kind of red herring, or a test balloon of some sort.
as a benchmark - I got a 5.5% FHA April '09 so that would be too low for this autorefi.. but i can do one myself to drop that 1%
Interesting to know what lines they will draw once they really crunch the numbers..
I have a better idea. How about we put Fannie and Freddie into runoff and stop digging a deeper fucking hole? If it wants a gorram RTC 2.0, let Congress stand up and fund it, finish the job and dissolve it.
Let the originators hold the mortgage paper on their books and issue covered bonds. Banks did just fine for centuries with no concept of securitization.
Damn, I'm so happy I found this site! I don't know how you guys keep up with the content, but I'm glad you do.
Admirable? You gotta be shitting me? I am gonna stop working 16 hours a day and figure out how to get me some gubbermint cheese. The hommoaners, already between a rock and a hard place, get some cheese waved in front of their starving eyes, and all the yhave to do is NOT read the loan docs.... and the banksters get another round of fees, collect interest for a little longer and flush the shit into the taxpayers pockets.
This is watching a 3rd world shit hole get looted with the oligarchs walking away with the assets and loan proceeds, while the citizens see a srop in standard of living as they try to service debt and pay back the money.
I smell more "capitalized income" on neg amort loans that the banksters can crow about, borrow against and pay themselves the fictious income as bonuses.
The end game cannot be far off.... and it won;t be peaceful.
Clever idea, but the road to hell is paved with these clever by half ideas. It only amounts to greater and greater gov't intervention. And, to even think that you'd object, it reminds me of the line in the Matrix II "comprehension is not a requirement of cooperation." This is what PO's the Admin and Dearest Leader to no end, and that he is not invited to the social event of the year the chelse's thing in NY. Too f'g bad eh!
please just watch it... http://www.youtube.com/watch?v=nKJj_A5rC7g
Lets just have a timeout & see thru the agenda.. LOL
Obama Is Going To Pay For My Gas And Mortgage!!!
http://www.youtube.com/watch?v=P36x8rTb3jI
One idea I had was on the line of forgiven interest rate. Wouldn't it be a hoot if the GSE's issued 1099's to those whose loans were modified? The 1099 would be the difference in interest to be paid based on original contract compared to modified loan amount.
This is what we call a win win win situation.
Govt gets assured votes.
Bankers get rid of all the crap on their books. I am talking about the defaults in the making and the defaults that will happen on the next round of ARM resets.
The public get to breathe a little easier for a short time and spend the extra money on goods and services.
As other have pointed out there is no free lunch. There will be fine print shackle the house occupier and there will be unintended consequences.
The banks will crunch the numbers and figure out whether it's in their interest to bleed people for 30 years at 4.5% rather than bleed for one or two more before the occupier (not owner) of the property makes the decision to walk or just stop paying. Banks are debt collectors and they will cut a deal for something now rather than nothing forever. If they put their weight behind the idea it will happen.
Talk of it being an administrative nightmare etc doesn't fly because the current holders of the paper will be relieved to be rid of badly performing stock with their shirt still intact if just a little thread bare. The real administrative nightmare will be hunting down or trying to prosecute vigilante defaulters who will have neighbors to advise them how to handle foreclosure proceedings. We don't have enough courts to churn though all the legal mumbo jumbo if people decide to fight every step of the foreclosure process. The word is out you can live for rent free for at least a couple of years. Project mayhem lives.
"Mako" pointed out a DIY fight foreclosure message board the other day where through legal mumbo jumbo you can essentially have your mortgage debt cancelled. I haven't gone through 5% of the site but if half of what these guys are saying is correct then Project Mayhem is alive and kicking.
Talk of it not being feasable to round up the correct paperwork for all those mortgages also doesn't fly becasue that paperwork will have to be rounded up anyway when it comes to foreclosure except it will be a lot more exacting if the occupier decides to fight.
For the sake of arguement if Fanny and Freddy (with appropriate house and congress approval) turned around tomorrow and sent out that one page refi tomorrow what would be the consequences? If someone else had a piece of that mortgage the onus is now on them to prove it to Fanny and Freddy. That's the sweet spot of fraud right there. The unintended consequences of investors waiting for years for payouts or pushing through paperwork on properties they have no legal claim to. Kinda like medical billing where you jack up the invoice presented to the govt.
** I'm assuming housing prices are at least going back to approx. 2000 AD pricing at minimum btw. because that is when it still made economic sense to buy a 2 family. Rent out half and live in the other and still turn a profit (not equity building - profit). I am also asssuming once the next serious slide starts it will overshoot the 2000 mark.
Unless there is emotional attachment to the property chances are most sane people will walk away from their 500K mortgage when the value of the house is now 150K.
It's just business.
I expect I will be junked into oblivion. Told I signed a contract and everyone should pay their way etc. So in the interests of full disclosure I sold my rental properties last year at a profit and have no mortgage and no skin in the game. I wouldn't get back into the rental game for any sort of money unless it was pure section 8.
Of course, besides all the problems with the fact that there will be no home mortgages going forward, prices on the market will uterly collapse...what about all those seconds? You know the seconds that made up the 20% of the zero down mania?
Just don't see this plan working out.
Many ARMs have pre-payment penalties. Most of the borrowers in trouble are seriously underwater. Real estate laws are State laws, and I see an awful lot of resistance should the feds try to usurp that area.
Might make for good PR - "See we're doing something to help average Americans" - but few will qualify, and if you can qualify you're not in too bad of shape anyway.
This will be a much greater waste of time and resources than the mortgage modification program. That almost assures that some moron in D.C. will do it.
I miss my country.
'I miss my country.'
No worries, the only ones who will miss our country are those who misrepresented this country.
Remember November-2010
while I agree with the program as a general rule of thumb--- after all--- there's nothing like the *present* to give everyone on the planet another 100 bps off of their interest on their mortgage--- it simply cannot happen since the vast majority of investment houses and hedge funds who own MBS have their "assets" and liabilities leveraged and matched and then hedged. if the suggested program ensued the collateral damage would be.... well.... unthinkable as everyone went to restructure their hedge portfolios in order to rebalance their assets vs liabilities. another example of how the FED appears willing to "stick-it" to the money-center banks who currently hold $1-TLN in excess capital yet they are not allowed to lend it due to increased capital requirements. all of that excess capital has to go somewhere.... so why not vaporize a huge slug of it with this brilliant idea? I think not. shawn mesaros, pamria llc
This amounts to an open, not that it hasn't, takeover of the U. S. mortgage industry by the government. I can see how this fits into Obama's ideology. Wall Street is full of geniuses. No wonder there is a revolving door that they can easily get a job in Washinton.
The American people better wake up!
This is nothing more than another taxpayer funded bailout of the corrupt bankers that caused this entire mess in the 1st place. Let them go bust and accelerate the decline of this entire corrupt system. The sooner we can hit bottom, the faster we can begin to rebuild without these loosers.
Let the worthless bumbs that got in way over their heads by buying a house they could not afford get tossed out of their homes. They must not be rewarded for being dumb irresponsible assholes.
Cutting rates is deflationary as it replaces a higher coupon with a lower one.
There is no way to sort out a fair way to refi the teeming masses. They all have to make their own decisions. Strategic defaults are just one of those decisions. The unintended consequences of this program are disasterous, inefficient and expensive.
Okay, so they call it a modification instead of a refi, so that the borrower won't have to think about his cash situation once this becomes the law of the land, but it will cost Fan and Fred. And we all know what that means - lube up the Treasuries and FRN presses, boys, we're going into overdrive, but hellyeah we'll save the taxpayers... at their own expense.
I don't follow the intracies of refinance or indemnification, but perhaps this would mean that mark-to-market could be introduced in the foreseeable future. Though, I don't see how it causing a stimulus -as I'm not sure what fraction of the $46B in mortgage savings is being paid now and whether it is as likely to be forthcoming in the very near future.
That said, this opens a tasty can of worms; for example, in some cases there is a ash portion paid on a property and then the mortgage loan percentage: the cash porton is a stable, know part of the paper/deed, the loan amount is a loan. Transfer the mortgages to regional entities (yet to be created), they have money-market positive balances on the stable part of the paper and liabilities of the outstanding mortgages. Because they hold mortgages for the properties in the area as a whole, the repayment schedule can be extended beyond the course of a single owner - the mortgage is on the house rather than the individual. It's in the Entity's interest to promote investment in the area. It disributes the risk. The FRBNY banks can remove their presence from Main street, thank you.
Wow look at the data coming out today...........
1. Chicago PMI
2. ISM New York Business Index .
3. UoM/Reuters Consumer sentiment.
4. Employment Cost Index.
5. Q2 GDP ( the big one).
any guesses here???
A crazy idea. Just a question. What happens to the poor SOB who does dot have his mortgage with a federal lender. Say he does business with some regional bank who, god forbid, kept the mortgage. Is this guy out in the cold? That can't work. This is a dumb idea. That it is coming out is just a measure of home desperate D.C. is.